Saturday, March 29, 2008

Four Indicators I'll Be Tracking Via Twitter

At the request of several readers, I'll be using morning Twitter posts to update several market indicators that I have found useful in assessing market strength and trend. These will include:

* New Highs/Lows - I particularly like to see if we have expanding or contracting new highs or lows following a period of market strength or weakness. This often signals reversal. Similarly, bursts of new highs or lows help confirm breakouts from ranges. The recent pullback in new highs was an excellent heads up for the market weakness this past week.

* % of Stocks Above Moving Average - I like this as a longer-term momentum measure and a way to assess whether stocks are gaining or losing momentum day over day. When I see divergences, I'll note the % of stocks above their MA for different indexes, such as small caps and NASDAQ issues vs. SPX stocks. This is helpful in identifying leading and lagging sectors as well.

* Demand/Supply - This is my shorter-term proprietary measure of momentum, tracking the number of stocks closing above vs. below the volatility envelopes surrounding their short-term moving averages. All NYSE, NASDAQ, and ASE issues go into this calculation. Once again, I like to see if we get more or less momentum day over day. The Cumulative Demand/Supply numbers provide excellent overbought/oversold readings and have done a fine job of tracking intermediate-term highs and lows in the past year or two.

* Technical Strength - I track 40 S&P 500 stocks that are highly weighted within eight sectors; there are five stocks per sector. The Technical Strength measure is a quantification of trending behavior in those stocks. I categorize these numbers into uptrends, neutral trends, and downtrends and examine shifts in trend day over day.

In addition to following these indicators on a daily basis, I'll also be assembling my usual weekly review of indicators on the blog over the weekends. This is a larger picture view of the markets that guides my basic strategy for the week.

For those interested in the daily review of indicators, the last five Twitter posts appear on the blog homepage. The complete set of "tweets" can be found on my Twitter page; free subscription via RSS is available there as well. I'll continue to post links of important market themes via Twitter as well as occasional market comments and a morning review of economic reports due out and how overseas markets are trading. Thanks for your continued interest.

About Me

Author of The Psychology of Trading (Wiley, 2003), Enhancing Trader Performance (Wiley, 2006), The Daily Trading Coach (Wiley, 2009), and Trading Psychology 2.0 (Wiley, 2015) with an interest in using historical patterns in markets to find a trading edge. As a performance coach for portfolio managers and traders at financial organizations, I am also interested in performance enhancement among traders, drawing upon research from expert performers in various fields. I took a leave from blogging starting May, 2010 due to my role at a global macro hedge fund. Blogging resumed in February, 2014, along with regular posting to Twitter and StockTwits (@steenbab). I teach brief therapy as Clinical Associate Professor at SUNY Upstate in Syracuse, with a particular emphasis of solution-focused "therapies for the mentally well". Co-editor of The Art and Science of Brief Psychotherapies (American Psychiatric Press, 2012). I don't offer coaching for individual traders, but welcome questions and comments at steenbab at aol dot com.